Update, June 12: Boeing’s new 20 year forecast issued immediately before the Paris Air Show now forecasts just 740 VLAs, a dramatic drop from 960+ in its previous forecast. You can bet we’ll ask Airbus about this–and just guess what its answer will be.

Air Transport Intelligence, covering a United Airlines presentation at an investors conference, reports the carrier isn’t interested in the 747-8I:

“We’re focused on a new technology aircraft to materially improve cost performance,” said United senior vice president corporate planning and strategy Greg Taylor today during the Bank of America/Merrill Lynch transportation conference. The 747-8 is “not on the top of our list”, he adds.

United has specified to each manufacturer the aircraft it is most interested in, and Taylor explains the carrier has “left the door open for creativity”.

Original Post:

This is the last of our continuing reports from the Airbus Innovation Days….

Airbus continues to have production and delivery issues with the A380 and now, with the global economy and premium traffic doing so poorly, there have been additional deferrals and YTD no new orders for the giant airplane.

But Airbus still believes in the aircraft and continues to hold to its belief that to 2026, there will be a need for 1,280 Very Large Aircraft (VLA) in the passenger category. Airbus forecasts the need for at least 300 more VLA freighters.

Airbus gets to its forecast by starting with the 200 sales now existing for the A380 and adding 400 more from existing VLA customers, including the Boeing 747-400 and the handful of older models in operation. Then Airbus believes there will be demand for 675 more VLA-Ps by 2026 due to traffic growth (assumed at 5% per year compounded) and increasing airport congestion.

We think this is optimistic. It took Boeing more than 35 years to sell 1,400 747 Classics (-100/-400), and that was at a time when the 747 initially had a monopoly on long-haul, trans-ocean sales (ie, before the DC-10-30/40 and L-1011-500 were offered). These were followed by the ETOPS Boeing 767 and 777 and Airbus A300-600R, A310 and A330, Open Skies and other market factors.

Even taking into account growth, this seems quite generous.

Boeing, on the other hand, believes the VLA market is closer to 960, including freighters. Officials continue to insist they forecast sales of only 300 A380s in 20 years. This means an average of six A380 sales per year over the next 17 years, using the Boeing forecast.

Of the 960 VLAs in the Boeing forecast, this splits to roughly one-third each of VLA-Fs, A380s and 747-8Is, or a 50-50 split for VLA-Ps. This doesn’t make sense for us.

Although Boeing’s market forecast and sales team believes Airbus will only sell 300 A380s, this doesn’t make sense to us, either. Nor, would it seem, to follow the logic of the father of the VLA, Boeing’s own Joe Sutter, designer of the 747-100.

In a retirement interview with Randy Baseler, then VP of marketing and the original Randy Blogger, Sutter predicted that Boeing would sell about the same number of 747-8s as it did the 747-400, or just shy of 700.

“I believe Boeing will build about the same number of 747-8s as -400s. But I do think the mix will be a little more toward freighters than passengers,” Sutter told Baseler.

This accounts for 700 VLAs along, compared with the 960 Boeing forecasts and the 1,280 by Airbus. We think the A380 will outsell the 747-8I by two or three or even four to one (the ratio right now is 10:1, excluding BBJs). But we also think it will take 30 years and not 20 to do it.

We were told last year that Boeing’s sales team believes Airbus will sell 600 A380s in 20 years. We actually think this is a reasonable forecast.

Will Airbus make money on 600 sales? In 2007, Airbus claimed its break-even on the airplane had increased to 450. There have been no updates to this figure since, and with additional delays (though measured in months and not years), we have this gut feeling that B/E in 600 is a challenge.

Inevitably, people make direct comparisons between the A380 and 747-8 and argue endlessly over which airplane has the better economics. In fact, we find these arguments to largely be silly for the Passenger version (the A380F, if it ever comes about, vs. the 747-8F, is another matter). The two airplanes fall within the VLA category, to be sure, but they are of sufficiently different size that comparing economics is not particularly meaningful. Even Boeing finally conceded that the 747-8I is a different-mission airplane than the A380 because of its smaller capacity.

And this is why Lufthansa ordered both the 747-8I and the A380: for two different missions. (Having said that, Lufthansa’s own analysis showed the A380 to be more economical than the 747-8I, putting to rest the analysis by Airbus, Boeing and others.) And the need to have an airplane smaller than the A380 but larger than the A330/A340 is why Lufthansa continues to want the airplane despite being the only commercial airline customer and despite the program difficulties.

We have spoken often with key people in Lufthansa’s fleet department (as opposed to relying on the public relations department) and have a keen understanding of the thinking, as well as the frustration with Boeing, over the 747-8I. Lufthansa wants the 747-8 to replace its 747-400s and is forced to keep the latter years longer than it had planned. LH is to get its 747-8I in 4Q11 but, given the history of the program, it remains skeptical.

Some 747-8F customers we talk to believe another program delay of 3-6 months is likely, based on resource issues within Boeing.

Lufthansa’s A380 are Wave 2 airplanes (those that actually will have wiring installed as intended instead of by hand as with Wave 1). Airbus continues to have production issues with Wave 1, but Lufthansa says its review points to Wave 2 proceeding well.

As for 10 A380s ordered by ailing International Lease Finance Corp: ILFC has the option to cancel these orders in January. We think CEO Steven Udvar-Hazy will do so for a variety of reasons, not the least of which are ILFC’s own financial challenges these days due to problems with its parent, AIG. But we wouldn’t be surprised if he swapped out these orders for some other Airbus products.

Watch for announcements on the ILFC-A380 issue in January.